Property Ventures Limited (in receivership and liquidation) v Gibbston Downs Wines Limited

[2014] NZHC 615

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2013-409-000170 [2014] NZHC 615

UNDER  The Companies Act 1993

BETWEEN  PROPERTY VENTURES LIMITED (in receivership and liquidation)

Plaintiff

ANDGIBBSTON DOWNS WINES LIMITED Defendant

Hearing:                   25 March 2014

Appearances:           J L Ling for Plaintiff

K W Clay for Defendant and for FTG Securities Ltd, a Creditor in support

Judgment:                25 March 2014

REASONS FOR DECISION OF ASSOCIATE JUDGE OSBORNE

as to appointment of liquidator

Background

[1]      On 18 March 2014, I appointed Kevin Newson to be interim liquidator of the defendant company.  That appointment ceases from the appointment I just made of him as liquidator.

[2]      The defendant’s liquidation followed initial resistance by the defendant to a winding up order.   The defendant had been pursuing appeal rights in relation to judgments which had put the plaintiff in a position to pursue liquidation.  When the defendant’s appeal rights came to an end counsel for the defendant responsibly did not oppose any further the winding up order.  It was in this context that I dealt, on an urgent basis, with an order for the appointment of an interim liquidator on 18 March

2014.

PROPERTY VENTURES LIMITED (in receivership and liquidation) v GIBBSTON DOWNS WINES LIMITED [2014] NZHC 615 [25 March 2014]

[3]      My primary concern in making the appointment of the interim liquidator at that point was, in the interests of preserving assets of the defendant, to preserve the status quo.   There was a likelihood that a secured creditor (FTG Securities Ltd), which  I  was  informed  is  a  company  associated  with  David  Henderson,  would exercise rights it asserted as a secured creditor.  Mr Newson was appointed and took up his role.

The liquidation hearing – proposed liquidators

[4]      Directions were then made for this hearing on an urgent basis.  Counsel filed such evidence and submissions as might assist the Court with regard to what would be the single issue at this hearing, namely the identity of the liquidator to be appointed.  Normally the identification of an appropriate liquidator comes from the plaintiff but the identification of an appropriate liquidator is open to challenge.  In this case the parties have proposed different liquidators.

[5]      For the plaintiff, the liquidators of Property Ventures Limited have proposed one  of  their  own  number,  John  Scutter,  as  their  preferred  liquidator.    As  an alternative, they proposed that the  interim liquidator, Mr Newson, now be appointed as permanent liquidator (subject of course to the rights of creditors at their meeting to resolve, under s 243(1)(b) Companies Act 1993, to apply to the Court for someone to replace the Court-appointed liquidator).

[6]      For the defendant, Mr Clay has submitted that the Court should appoint

Wayne Deuchrass and Iain Nellies.

Discussion

[7]      I am satisfied on the evidence that Mr Newson is an experienced liquidator who brings with him professional background and qualifications which fit him for the task.

[8]      Mr Clay submitted for the defendant that Mr Newson does not qualify to be a liquidator because it is one of the essential elements of a liquidator’s role that he or

she acts both independently and impartially1 in relation to the liquidation and furthermore is seen to so act.  Under that umbrella submission, Mr Clay made four submissions against Mr Newson’s appointment.

[9]      First, Mr Clay submitted that on the evidence Mr Newson should be seen as too closely aligned with Messrs Walker and Scutter, the liquidators of Property Ventures Ltd, which is itself a creditor of the defendant.   Mr Clay noted that Mr Newson did not deny that he has already received assistance and information from Messrs   Walker   and/or   Scutter   as   he   (Mr   Newson)   took   steps   and   sent correspondence, upon his appointment as interim liquidator.   Mr Clay further suggested that there was a tone of abruptness to Mr Newson’s correspondence which should undermine confidence in his impartiality.

[10]     I do not consider the steps taken by Mr Newson as establishing a lack of independence.   Given that the potential appointment of Mr Newson as interim liquidator had been signalled for some time before an order was made it was sensible on  Mr  Newson’s  part  that  he  take  steps  to  obtain  beforehand     background information from those well placed to provide the information.   The information might have contributed to an answer to the claim of secured interest which was anticipated to come from FTG Securities Ltd (and which has since eventuated).  The content of Mr Newson’s correspondence reflects what he must have considered appropriate to the urgency of his situation as interim liquidator.  I do not view it as reflecting partiality for some other entity.

[11]     Secondly,  Mr  Clay  submitted  that  Mr  Newson’s  identification  of  a  Mr Guthrey  to  assist  him  as  “an  agent”  showed  a  lack  of  independence  which disqualified Mr Newson.  In fact, the evidence indicates that Mr Newson perceived a need to take steps to lock up Gibbston’s property, Mr Newson requested Mr Guthrey to attend to that task.   It is a physical task.    It is not a matter relating to  the investigation of the defendant’s affairs or the pursuit of recoveries for creditors. Urgent steps were required by an interim liquidator who was likely to be in the role

for only a few days. The liquidator initiated steps which got a particular job done.

1      See Justice Paul Heath and Michael Whale, Heath & Whale on Insolvency (2nd ed, LexisNexis, Wellington, 2013) at 18.4.

[12]     Thirdly, Mr Clay submitted that the Court may be concerned that in relation to  the  companies  previously  associated  with  David  Henderson,  the  significant amount of litigation which has occurred has been “solely” or “almost solely” at the instigation of Messrs Scutter and Walker as liquidators of the various companies they have been appointed to liquidate.

[13]     I do not have the evidence upon which to find correct Mr Clay’s submission as to the extent of the role of Mr Scutter and Mr Walker in such litigation.   More fundamentally, their role in whatever litigation has been issued for other companies cannot inform a decision as to Mr Newson’s appointment as liquidator.  I have no basis for considering that a particular approach taken by other liquidators is going to be reproduced by Mr Newson.

[14]     Finally, Mr Clay made submissions as to possible cost efficiency flowing from having “local liquidators” appointed.  Mr Deuchrass is Christchurch based.  Mr Newson is Wellington based.   The liquidations of a considerable number of companies associated with Mr Henderson’s corporate structure are in the hands of Mr Walker and/or another from his base in Wellington.   To that extent, with Mr Newson also based in Wellington, there may be some benefit in the co-location of liquidators in Wellington as any matters of inter-entity relationships come to be dealt with.  I avoid putting too much weight on the geographical element as today’s means of communication and correspondence reduces the consequences of physical separation.  Location is not likely to result in great costs saving unless a particular liquidator has to be at a particular site regularly.   In this case, the subject of the defendant’s business was at Gibbston, removed from the residence of any of the proposed liquidators.  There is no evidence to suggest that there will be a call for site visits in significant numbers.

[15]     I indicated to counsel informally when making directions for this hearing that I did not wish to see the necessary appointment of a liquidator to become something of a beauty parade of those put up by the plaintiff and those put up by the defendant. I view the situation as having become something of a beauty parade.  A concern for me in deciding whom the Court should appoint has been to take the heat out of competing considerations before the Court.  The important object for this insolvent

company is that this liquidation commence now with the appointment as liquidator of someone experienced in liquidation work, with an established ability to act independently and impartially.

[16]     Mr Newson is an experienced practitioner with both chartered accountancy and legal qualifications.  He has liquidation experience, including in the liquidation of Bridgecorp Limited.  He deposes as to a professional and social acquaintance with Mr Walker which  is of a usual business nature and  is not one which  erodes  a professional person’s ability to act independently and impartially.

Ruling on evidence

[17]     I made a ruling before I commenced this hearing which I now record.

[18]     I excluded as a document to be read in this proceeding an affidavit sworn by Mr Walker today and filed as a copy today.  The affidavit was filed very late, perhaps understandably because of the tight timetable for this hearing.   But it contained material which should have been the subject of a right of response on the part of the defendant.  As it was, I did not find anything in Mr Walker’s affidavit which would have assisted the Court’s decision-making.  The appropriate course was to rule that this affidavit be not admitted.

Costs

[19]     The  appropriate  order  was  that  costs  follow  the  event.    There  was  a suggestion by Mr Sullivan in written submissions that there should be an order for increased costs.  I see this as an ordinary case which appropriately attracts costs on a

2B basis.  Hence the order I have made in that regard.

Associate Judge Osborne

Solicitors:

DLA Phillips Fox (Counsel KP Sullivan) Canterbury Legal Services (Counsel KW Clay)